giulio

Fairfax now owns more than 25% of Ovostar Union pcl, an egg producer in Ukraine. https://www.money.pl/gielda/komunikaty/6943676719220865.html Looks like they are increasing exposure to the agri/food sector. https://ovostar.ua/en/pro-kompaniyu/pro-nas/

I skimmed through the global outperformers (stocks that 10x in the last decade) report by jenga partners and thought others on this trend might find this interesting: the report has a nice section on India -> why it had such a large share of outperformed, which sectors performed best and more a brief case study on Airports of Thailand that has similarities with BIAL (strong passengers growth, margins improvements, not outright ownership) G Global Outperformers (Jenga Investment Partners Limited).pdf

TEDU, PRM

https://otp.tools.investis.com/clients/uk/hostelworld1/rns/regulatory-story.aspx?cid=1218&newsid=1697817 FFH stake in HostelWorld is above 5%.

TEDU

https://www.prnewswire.com/news-releases/concerned-shareholder-urges-blackberry-board-to-guard-against-unfair-buyout-bids-and-oppose-watsa-as-director-as-board-considers-strategic-alternatives-301858167.html He is concerned, shareholders on this board are 3x more concerned! No opinion on BB, I just find this funny. G

We should try to see the shorts in the context of WHEN they were made. Judging ONLY the outcome is somehow unfair to me. To be clear: they should not short! Can you blame them for shorting Tesla? I guess so, just remember that Tesla was almost bankrupt and (later on) its valuation did not make any sense considering the auto industry dynamics. How many predicted $1 trillion mkt cap? how could you have predicted something like 2020 and the subsequent investors' (mis)behavior? Agree with @Thrifty3000 on deflation swaps. My guess is Watsa saw them as protection for FFH capital, rather than a lottery ticket (an example of the latter = Ackman shorting the HKD). As Howard Marks puts it: "Only the things that happened happened. But that definiteness doesn’t mean the process that creates outcomes is clear-cut and dependable. Many things could have happened in each case in the past, and the fact that only one did happen understates the potential for variability that existed... the history that took place is only one version of what it could have been". Also, expecting management to apologize at every annual meeting/shareholders letter...isn't this a bit too much? They made a mistake, recognized it, apologized, said they are not going to do it again, learned their lessons and moved on...shareholders should too! They don't have a better process to explain because they won't short again! I like this simplicity Ps. @Viking I really struggle to understand this "Capital preservation is paramount; not return. And you see it in Berkshires results... they are not close to what they were". Downside protection has always been paramount at BRK but to say they are not interested in return would be paradoxical! Returns are a product of your opportunity set...I am glad they have been "inactive" in the recent past, but you can rest assured Buffett will swing BIG if the opportunity knocks!

If brk tries so hard to avoid being a bank holding company there must be a reason, I think...

+1 not an expert but I see banks being disrupted by... banks! Probably similar with insurance. I don't understand what Revolut posseses that banks don't have or can't have honestly. Trying to learn though! G

Fantastic book, worth reading several times keeping in mind when it was written. My copy is full of earmarks. While reading I thought several times "this is something that Buffett/Akre would say". Phelp's style is also enjoyable, you'll not get bored. it's a fast read with some thought-provoking nuggets of wisdom. G

@Candyman1 100% agree with your framework, "an ounce of prevention..." In the end nothing is going to change business wise, this is just an accounting trick with some numbers moving around. What matters is FFH conservative underwriting discipline and culture. Thanks for the discussion! G

@Candyman1 thank you for this perspective! I think this article does a good job of summarizing IFRS 17 https://www.footnotesanalyst.com/prudent-versus-unbiased-ifrs-17-insurance-liabilities/ "IFRS 17 requires that the fulfilment cash flows included in the best estimate liability must be unbiased probability weighted expected values. This component of the total insurance liability should not depend on management policies and should therefore, in theory, be fully comparable between companies. In particular, the amount should not be affected by the insurer’s policies regarding prudence or conservatism, sometimes previously referred to as the ‘strength’ of reserving" Not only will insurers need to discount liabilities (change in interest rate will affect both sides of BS now), but they need to report liabilities in a more standardized way. If an insurer estimates a loss reserve to be 80, they cannot report 100 for the sake of conservatism anymore. Please correct me if I am wrong. G

Watsa on Greece, Eurobank, US banking Crisis and inflation https://knews.kathimerini.com.cy/en/business/prem-watsa-greek-banks-are-safer

I agree, what you need is faith not trust. Binance and CZ have 300+ accounts for proprietary trading and push users to use VPN to trade, like any other porn/file sharing website. How can you trust something like that? It's beyond ridiculous. G

Here is what I found most interesting reading FFH 2022 annual report: Ki had a CR of 99% and received a $152M investment from a third-party investor gross premiums written of $834 million in only its second year of operation IIRC Brit has 20% economic interest in Ki; curious to know what the plans are for Ki and why Brit opted for only a 20% interest Interestingly, Ki and Digit writes similar level of premiums; of course, prospects are materially different, I wonder what Ki valuation might be consolidated investments' total revenue of $5.6 billion, EBITDA of $743 million and pre-tax income of $303 million (excluding a $133 million writedown of Farmers Edge) before minority interest in 2022 Management guidance: 15% on 2.1B BV (this is what I understand from Watsa's letters) Nice to see a table on consolidated companies' EBITDA, interest expense, D&A and pre-tax income (page 208) Markel ventures in 2022 = revenues of $4.8 billion, record EBITDA of $506 million Reserves development has not been so "favourable" since 2017: 3 years of losses, an improvement in the last 2 years, but a major "help" was from FX Maybe this will improve as past acquisitions are digested and a better underwriting discipline prevails Future allocation -> I think FFH will spend roughly $2.3B repurchasing minority interests in its insurance companies (excluding dividends). I think these deals, similar to Eurolife's, have a fixed price (i.e. a call option). In 2022 FFH paid $650M for 12% of Allied (650M cash + value of the option + dividend accrued = 733.5M as reported); based on these numbers, I estimate FFH will pay another $930M for the remaining 17.1%, for a total of approximately $1.6B (what co-investors invested in 2016). Add to this $900M related to Odyssey and $375M for Brit. FFH has the option to purchase the remaining interests of the minority shareholders in Allied World at certain dates until September 2024 in Brit at certain dates commencing in October 2023 in Odyssey Group at certain dates commencing in January 2025 As a side note: FFH essentially uses OMERS et alius as debt providers, paying them dividends (interests) at a 7-8% rate Insurance market: "Favourable underwriting conditions are expected to continue into 2023, albeit more modestly after very healthy rate increases in both 2021 and 2022" don't expect 15%+ growth in 2023 Unless... "if interest rates remain higher for longer, the unrealized investment losses will take many years to unwind and could prolong the hard market for a few years The reinsurance sector continued (...) to achieve significant rate increases. Following the landfall of Hurricane Ian, in 2023 the reinsurance market sustained its most challenging January 1st renewal season since 2001, following the 9/11 attacks float increased by $3,393.1 to $31,230.0 (12% growth) I highlighted a couple of lines on the company strong culture which I believe is underestimated and not enough appreciated as a competitive advantage (20 years of service for officers...these people want to stay and grow within Fairfax, it must be good!) Very happy to receive comments and discuss if I missed something or if there are errors in what I wrote! Thanks, G

memories? anyone?

@valueinvesting101 good points. BIAL growth plans were laid out in the latest letter. With the new terminal they have 2.5x more capacity. Plans are 3.5x by 2029 (70 million passengers from 20 million) and 4.5x by 2033 (90 million passengers). "These achievements lay the foundation for BIAL’s plans to grow non-aero revenue by five times over the next decade." Airports are valued at 15-20x EBITDA. Not too stretched for me, but I understand your point. I don't know how to find information about Chemplast parent company (or TCI sub) but these are fair questions to ask at the annual meeting. Time is on their side! This is worth highlighting too: "Over the eight years since Fairfax India’s inception, Fairfax India has significantly outperformed the Indian markets" (AR 2022) FIH book value per share +8.5% US$ S&P BSE Sensex 30 +5.8% G

The way I look at FIH is a dollar bill selling for 50 cents that will grow over time. These are the best investments you can make and the ones I prefer. Frankly, the discount does not bother me too much since they are not going to pay for an acquisition with undervalued shares. How much will the investment compound from here? 10% per share (considering dilution/buyback) seems reasonable considering past results, underlying companies economics and FX. BIAL, close to 50% of portfolio, should earned a guarantee return of 16% on equity non-aereo revenue, e.g. duty free, shops ecc, cargo revenue and real estate may provide additional upside I am not sure, but while UDFs (aereo revenue) are capped at 16% return, non-aereo revenues should not be capped and have higher margins What companies make up the other 50% of FIH portfolio? Small, mid-cap firms, with c. 15% ROE and mid-teens to HSD growth rate, operating in sectors that should enjoy strong tailwinds as GDP (and GDP per capita) increases. Examples: Finance and banking: IIFL Finance --> 16% CAGR in AUM (last 5 years), 29% revenue growth in 2022 and HDD ROE CSB Bank --> income increase 40% in 2022 but the bank will benefit from better management and higher efficiency in the future NSE --> I wished they bought more than 1%! Great business Shipping: Seven Island --> "Despite this volatility, SISL has mostly demonstrated stable and consistent revenue and EBITDA CAGR of about 25% in the last 10 years" Maxop and Jaynix --> precision die casting; this reminded me of an investment that WESCO made in the 80s, Precision Steel. I have no idea how these investments will play out; Precision Steel had its niche, earned good returns for some time but suffered during economic contraction. Not a "cinch". I was impressed by their Investment Selection section in the latest AR. I also like a lot their flexibility to invest along the capital structure, not just equity and management focus on finding great managers to partner with. Many don't seem to be as excited and/or do not believe that Fairfax has the right skills: this is a personal call. WRT the discount and when will it close? Listing of the airport will help but performance will be more important IMO. Mid-teens return should create demand, maybe some roadshow to raise more capital at a fair price? I have no idea. I like the setup and have lots of patience. We'll see. G

8.2M shares issued to satisfy performance fee so far. 42.5M shares issued to raise additional capital as they had good investment opportunities in 2016-2017. I hope someone asks questions about compensation at the annual meeting. I don't understand why FFH needs to take cash fee on unemployed capital + shares for performance every 3 years, since FFH already controls FIH through multiple voting shares. I would prefer that capital to remain in FIH until they find a new suitable investment. I don't think FFH needs more incentives than their big ownership stake. Guess we have to live with it. The investment is still compelling to me. G

https://www.ft.com/content/b556badb-8e98-42fa-b88e-6e7e0ca758b8?desktop=true&segmentId=7c8f09b9-9b61-4fbb-9430-9208a9e233c8#myft:notification:daily-email:content They went for an extra [0.4 percentage points] of yield and blew up the bank,” said the person, whose fund held a bet against SVB. “It is really sad"

The benefits of being part of Brk should accrue to Brk shareholders not Allegheny's IMO. If I buy something and am able to improve its results, why should the seller benefit?

FWIW

https://www.wsj.com/articles/jerome-powell-to-testify-to-congress-on-outlook-for-rates-inflation-e4e7f1e3?mod=itp_wsj&mod=djemITP_h "The yield on the two-year Treasury note climbed above 5% for the first time since July 2007. The yield on the 10-year Treasury slid to 3.974% from 3.981% Monday" Not too bad...this constant upward revision of interest income is making it harder to keep my emotions in check! I am going to read a couple of Howard Marks memos to refocus on being emotionless and rational. G

The only two podcasts I heard with Munger on are the one he did with cnbc after sbf was arrested and the one he did with professor Steve Pinker. I am not sure this is what Buffett was referring to though.

Yes, March 10th is what they said on the last cc